Housing, Jobless Data May Signal Slowdown

January 07, 2000|By From Tribune News Services.

WASHINGTON — In signs the economy may have begun to slow, U.S. consumers bought new homes in November at a slower-than-expected pace and the number of Americans filing jobless claims rose, the government said Thursday.

The housing data reinforced the notion that after a record year for real estate, the sector may become a drag on the economy. But rising home prices raised concerns about inflation potential in the world's richest economy.

The jobless claims had their biggest one-week rise in a year, climbing above 300,000 for the first time in three months, although economists considered the jump somewhat misleading because of holiday factors.

The Commerce Department said the number of new single-family homes sold in November fell by 7.1 percent, to a seasonally adjusted annual pace of 865,000 units, down from a 931,000 unit pace in October. The October rate was revised down sharply from a previously reported 986,000 units.

The 7.1 percent decline was the largest since an 8 percent fall in December 1997. Economists had expected a stronger sales pace in November of 926,000 units.

"While a home sales rate of 865,000 is still very strong on a historical basis, it is off over 12 percent from November 1998," said economic consultant Joel Naroff of Philadelphia. "That tells us that residential investment should be a drag on the economy during this year."

New-home sales have been above an annual rate of 800,000 for a record 23 straight months. The previous record was a five-month string of sales at that level set in late 1977.

"If home sales overall slow down (hellip) then you will see a slowing of consumption spending from its hyper pace and we'll see the savings rate start to inch up again, and the Fed will see that as a happy occurrence in this economy," said James Annable, chief economist at WingSpanBank.com, the Internet-only bank of Chicago-based Bank One Corp.

The hot housing market has been a big factor behind high levels of consumer spending that have driven the economy. After buying a home, consumers typically spend on appliances, furnishing and renovations.

But despite the slackening home sales pace, there was one worrisome aspect to the report: rising house prices. The median new-home price rose to a record $167,400 in November from $159,000 in October, while the average home price rose to a record $209,700 from $201,300 in October.

New-home sales slowed, most notably the Northeast, where sales plunged 31.5 percent. The sales pace slowed 7.8 percent in the Midwest, 5.4 percent in the West and 3.1 percent in the South.

Separately, the Labor Department reported the number of newly unemployed Americans filing for state benefits jumped by 33,000 last week to 309,000.

Initial jobless claims, which give an early reading on the strength of the labor market in the holiday-shortened week ended Jan. 1.